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Since 1st January 2018, the French wealth tax known as Impôt de Solidarité sur la Fortune (or ISF) is no more, replaced by a new kind of wealth tax solely focused on property called Impôt sur la Fortune Immobilière (or IFI).

Since 1st January 2018, the French wealth tax known as Impôt de Solidarité sur la Fortune (or ISF) is no more, replaced by a new kind of wealth tax solely focused on property called Impôt sur la Fortune Immobilière (or IFI).

IFI, a new ISF?

At first glance, IFI simply looks like ISF but solely focused on property situated in France. In other words, the basis for the calculation of IFI is the same as the former ISF and if the taxable net value of French property held within a tax household exceeds €1.3M, IFI is applicable as follows:

Taxable net value

Applicable Rate

Up to €800,000.00

0.00%

Between €800,000.00 and €1,300,000.00

0.50%

Between €1,300,000.00 and €2,570,000.00

0.70%

Between €2,570,000.00 and €5,000,000.00

1.00%

Between €5,000,000.00 and €10,000,000.00

1.25%

Above €10,000,000.00

1.50%

 

Like for ISF, IFI is only payable by private individuals and not businesses. Equally, the same rebates will be applicable and for instance, the main residence will benefit from a 30% relief.

Even if IFI focuses on property, shares of companies such as Société Civile Immobilière (or SCI) should remain taxable although certain deductions ay be applicable.

New rules of IFI

Despite the great similarities with ISF, IFI has implemented a few new mechanisms.

For instance, when the taxable asset has been received upon death leaving the usufruit to someone and the nue-propriété to another, taxation is applicable depending on the value of the respective usufruit and nue-propriété. Previously, only the holder of the usufruit would be taxable based on the value of the entire asset.

In addition, the way interest-only mortgages could reduce ISF liability will be less efficient with IFI since a theoretical amortisation will be calculated to allow a deduction of the liability decreasing over time.

Overall, there are very few changes for individuals residing outside France and holding property located in France but the slight discrepancies between IFI and ISF mean that it is preferable to seek advice.